Tom Steyer: Climate Solutions Should Make Lives Easier and Better

Sometimes, the way you frame a challenge can alter how you approach it, unlocking solutions that might otherwise be overlooked. Take climate change: is it a crisis to fear or an opportunity for business leaders and investors to build a better future?  

Tom Steyer, Co-Executive Chair of Galvanize Climate Solutions, a climate-focused global investment firm, focuses on opportunities to help address the impact of climate change while aiming to produce an attractive return. “We won’t make an investment unless it has substantial positive climate impact, but at the same time, we’ll never compromise on return,” Steyer said at a recent BMO client event in San Francisco.  

Steyer’s absolute return-focused approach to investing at Galvanize is not unlike the main message in his New York Times-bestselling book Cheaper, Faster, Better: How We’ll Win the Climate War: solutions to climate change won’t necessarily arrive by convincing people to sacrifice their lifestyles or modern comforts. It’s about showing how investments in the solutions can lead to better products and services.   

During a fireside chat at the event, our wide-ranging conversation explored the risks of climate change as well as the business opportunities, the role of market-driven solutions and his thoughts on achieving a more sustainable future.  

Check out a podcast based on the conversation: 

For the transition to clean energy to succeed, people need to know what’s in it for them, Steyer said. One hurdle to progress is that different groups don’t always use a shared language when trying to convey the seriousness of the situation. To illustrate, he pointed to expressing temperature differences in Celsius to an audience that mostly thinks in Fahrenheit. “No one in the U.S. lives in Celsius,” he said. “No one knows what it means when they hear about a ‘one-and-a-half-degree Celsius change.’” 

One of the ways to avoid this disconnect is to think about a challenge like climate change from a customer’s perspective. For example, this could mean reframing the conversation to show how the transition to clean energy will solve their pain points and make their lives better. “People aren’t going to buy a heat pump to be nice,” he said. “They’re going to do it because they want a cheap, effective way to heat their homes.” 

Another challenge on the road to a more sustainable future is the deployment of new technologies. Developing new technologies and then making them commercially available and reaching scale are difficult to do. 

Still, the potential for alternative energy sources such as solar is there. It’s cheap and being adopted around the world, but the challenge is it’s an intermittent source of energy.  

Solar is already cheaper than natural gas, but it isn’t available 24/7, 365 days a year like natural gas is,  said Steyer. As battery duration gets dramatically longer, that's no longer true, and suddenly solar plus battery is a replacement at a much cheaper price than other forms of energy.  

It's also not just about storing power but ensuring it can get to the end user by improving the efficiency of the power grid. Rather than building a new grid, which would be expensive and time-consuming, Steyer is exploring ways to increase efficiency with information systems. His point is that we need to accelerate the development of these technologies because they will quickly flip the economics around the energy transition. 

Steyer’s comments encapsulated many of the key themes of the event, including how to integrate climate change into business strategy, the role of carbon capture and the need to find long-duration energy storage solutions.   

During our conversation, Steyer also reflected on his extensive investing career, particularly his founding of Farallon Capital Management in 1986. Farallon was one of the first hedge funds to use absolute return, a strategy that focuses on generating positive returns regardless of market conditions.  

“There aren’t a lot of places where you can make an equity return with bond-like risk,” he said. “You have to be able to know something that other people can’t easily access and reproduce for a lower return.” 

For those determined to start their own business, he recommends a strategy that focuses on developing strong teams, scoping for large and attractive total addressable markets and technological innovations that enable you to do something no one has done before. Without those pieces in place, it’s going to be hard to succeed, he said.  

As our conversation came to a close, Steyer expressed optimism for the planet and the people trying to make it a better place. He said he believes the dispersed decision-making that comes with capitalism will help us face the daunting challenges that lie ahead.  

“People on this planet are really smart and we’re going to figure this out as a group,” he said. “I’m a huge believer in humanity, and I think that people inevitably do the right thing even though it can be hard to get there sometimes.”